KUALA LUMPUR: The Apec Business Advisory Council (Abac) is dedicated to actively participating in addressing the increasing challenges posed by economic fragmentation through collaborative efforts.
Its chair for 2024 Julia Torreblanca pointed out that its Apec Policy Support Unit found that foreign direct investment (FDI) inflows into the Asia-Pacific Economic Cooperation (Apec) region have been falling (-9% in 2022) despite the bloc performing better than the global average at investment facilitation.
“Seeing Apec FDI inflows decrease even with post-Covid rebound is concerning. Action is needed urgently to get us back into the route of sustainable economic growth,” she said on the last day of the first Abac meeting (Abac 1) for 2024 recently.
Torreblanca noted that the FDI decline could be driven by geopolitical tensions which affected the regional supply chain.
In order to tackle the issues, she said, the council’s priorities this year include strengthening the economic architecture of the region via working closely with other Apec officials to make tangible progress towards the Free Trade Area of the Asia-Pacific (FTAAP).
She added that the subsequent FTAAP should draw on the best of the high-quality trade agreements in the region.
“We should build towards that now through practical initiatives, for example, digital trade coherence and responsible artificial intelligence, supply chains, women’s access to financing and the trade tools we need to fight climate change,” she remarked.
Furthermore, she said that a second priority this year involves the development of practical ideas on how to support the transition from the informal to the formal economy.
“This is a real challenge for many developing economies in the region, hindering our ability to fulfill our economic potential and provide people with more and better opportunities. We want to develop pragmatic approaches that can help shift the dial.
“Our theme for the year is ‘people, business, prosperity’, to guide our work across key issues including trade and investment facilitation, digital transformation, sustainability and inclusion,” said Torreblanca.
Abac 1, which was hosted by Malaysia, raised concerns on the mounting strain of economic fragmentation as well as the potential threats it could have towards growth, inclusion and the climate fight.
There will be three more meetings in 2024, with the next meeting slated to be held in late April in Hong Kong, where the Abac will reconvene to continue to develop its recommendations for presentation to Apec leaders during its summit in November, to be chaired by Peru this year.
Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz said the recommendations by Abac to the economic leaders will play a crucial role in guiding policy formulation to address the pervasive impacts stemming from ongoing economic and geopolitical challenges affecting the Asia-Pacific region.
“Exposed vulnerabilities from the pandemic, exacerbated by prolonged geopolitical situations, have rippled across industries, causing production delays, critical component shortages and unprecedented disruptions of global supply chains.
“This leads to the rapid surge in the costs of goods and logistics and thus poses a significant concern, affecting profit margins and hindering business competitiveness, especially for micro, small, and medium enterprises (MSME).
“As such, multilateral initiatives such as the Apec is crucial to allow collective and continuous efforts are taken. From this context, the roles of Apec and Abac are crucial, to serve as beacons of stability and foster an environment that supports sustainable economic growth,” said Tengku Zafrul.
In the collective pursuit of a sustainable economic growth and economic inclusivity for the Asia-Pacific region, he said that it was vital to recognise the pivotal role of human development and capacity building.
“For Malaysia, this means ensuring all economic actors, regardless of levels and sizes are also being given the attention as highlighted in Mission 4 of our New Industrial Master Plan 2030, which is safeguarding economic security and inclusivity.
“This is in view that MSME constitutes over 97% of businesses and employs more than half of the regional workforce, serving as key growth drivers for many of our economies.
“With priority placed on facilitating financial inclusion, developing digital transformation and strengthening pensions and health systems, I believe that MSME are not left behind in our work as Abac has laid the inclusive groundwork for a more resilient, innovative and prosperous Asia-Pacific.
Tengku Zafrul pointed out that it is paramount to ensure that inclusivity is “not just lip service”, but must include all segments including women, and marginalised communities in alignment with Malaysia’s Madani and the principles of the United Nations’ sustainable development goals.
At the same time, he noted that the Apec holds a distinctive significance for Malaysia as it serves as a fundamental pillar of the country’s economic strategy, guiding the formulation of national policies aligned with the region’s collective aspirations.
“At the core of these policy frameworks, we remain focused on the benefits and long-returns to the country in terms of high local R&D (technology transfer), nurturing a strong industrial ecosystem with innovation intensity, and improving inclusivity across areas and communities by creating opportunities to participate in the global supply chain, echoing much of the objectives and goals of Apec.
“Similar to Apec’s core principles, Malaysia remains committed to being open and receptive to opportunities and investments, particularly from our long-standing partner economies. Notably, in 2022, Apec economies made substantial contributions, constituting an impressive 76.5%
of Malaysia’s net FDI inflows. This underscores Malaysia’s steadfast dedication to fostering robust economic partnerships within Apec,” he added.
Meanwhile, Abac issued a statement on the upcoming World Trade Organization (WTO) Ministerial Conference (MC13), urging Apec trade ministers responsible to work towards driving ambitious outcomes.
“A disappointing outcome is in prospect for the 13th WTO Ministerial Conference in Abu Dhabi.
“Instead, we urge Apec ministers responsible for trade ... to seek agreement on a permanent moratorium on customs duties on electronic transmissions; to seek the immediate reinstatement of the appellate body and agreement to necessary reforms to the WTO's dispute settlement system; and to pursue meaningful reforms in agriculture and fisheries,” said the Abac.
In addition, the council called on Apec ministers to support full endorsement of the Investment Facilitation for Development Agreement and its integration into the WTO legal framework; to champion a package of substantive outcomes on e-commerce this year; as well as to support initiatives that seek to enable trade effectively to address sustainability.
“It is time for Apec economies to act decisively to support ambitious outcomes at MC13. Collectively, we can advance a trade environment that not only nurtures economic growth but is also responsive to the demands of our societies and the planet. This should be our legacy,” the council stated.
